2021, Chemical Market Trend Forecast

At the end of the year, looking back at the chemical market this year, it can be described as unprecedented ups and downs. With the outbreak of the epidemic and the plunge in oil prices, the chemical industry was severely impacted in the first quarter, with product prices falling deeply and industry profits shrinking sharply. Fortunately, with the rapid advancement of oil prices, epidemic control, and resumption of production, the domestic demand side took the lead to recover. Industry inventories gradually digested, the market began to rebound, and some chemicals started to skyrocket. In the second half of the year, the production capacity of chemical products tended to increase. Judging from the growth rate of 22 chemical products tracked by Jinlianchuang, the fastest growth rate is ethylene glycol, with an annual growth rate of up to 40%. Xylene, styrene, phenol, acetone, ethylene, and purified terephthalic acid have a growth rate of more than 20%. While the market is recovering, problems such as simultaneous production capacity failures and profit differentiation still plague the development of the industry.

So what is the trend of the chemical market next year?

 

Ethylene

 

This year, the domestic ethylene production capacity is about 34.91 million tons, with an annual increase of 21%. Most of the new capacity comes from large-scale refining and chemical integration projects, including Dalian Hengli Petrochemical Co., Ltd. (hereinafter referred to as Dalian Hengli), Liaoning Polarien Debase Petrochemical Co., Ltd., Sinochem Quanzhou Petrochemical Co., Ltd. and Zhongke (Guangdong) Refining & Chemical Co., Ltd. In the future, as foreign-owned enterprises, joint ventures, private enterprises, and local refineries enter the market, domestic ethylene production capacity will be further released, and the growth rate is expected to be 6 million tons. At the same time, the phenomenon of product homogeneity will also intensify. Due to insufficient independent innovation capabilities, high-end products are still highly dependent on foreign sources, and the impact of low-cost import sources on the market will continue to exist.

 

Acrylic

 

In the past two years, the production capacity of propylene has developed in a spurt, with refining and chemical integration projects surging, and upstream and downstream supply pressures are increasing. The expansion of downstream products is concentrated in polypropylene, and the overall supply growth rate is faster than the downstream demand growth rate. This year, the domestic propylene production capacity is 43.99 million tons, mainly for propane dehydrogenation and steam cracking. Looking forward to 2021, the market prospects are not optimistic. A large number of integration and propane dehydrogenation projects are expected to be launched, supply pressure continues to increase, the industry structure will also change, and the seller's market will become the dominant market.

 

Ethylene oxide

 

This year, the domestic production capacity of ethylene oxide is about 4.985 million tons. At the beginning of the year, under the influence of the epidemic, trade disputes intensified, crude oil prices plummeted, and import and export trade stagnated, but profitability remained stable. As of early November, the average profit was estimated to be about 898 CNY/ton. In 2021, the domestic ethylene oxide market will still maintain a high level of linkage with downstream products, especially the polycarboxylic acid water-reducing agent monomer market. Although the impact of Asian ethylene prices on the cost of ethylene oxide is lagging behind, with the release of new ethylene production capacity, cost reduction is an inevitable trend, downstream products will be more competitive, and export volume will increase steadily. In addition, technological innovation and industrial structure adjustment in the field of ethylene oxide deep processing will continue to be strengthened to enhance the competitiveness of downstream products and promote the high-quality development of the industrial chain.

 

Methanol

 

The current methanol production capacity is 91.76 million tons. The newly added capacity in 2021 will focus on existing project expansion, olefin supporting, and refining and chemical integration projects. The methanol-to-olefin supporting methanol plant in Northwest China will be put into operation soon, which will have a greater impact on the market. The traditional downstream growth rate is limited, and most of them are in adjustment. Methanol prices hit a record low this year, and most companies are losing money. In this context, methanol will replace old and new production capacity with high-cost production capacity in the future and accelerate the industry's elimination of outdated production capacity. In addition, next year's downstream demand side olefin growth will slow down, and methanol market supply will be relatively loose, suppressing price rebound.

 

Ethylene glycol

 

It is estimated that ethylene glycol production capacity will reach 20 million tons in 2021, and polyester production capacity will be approximately 68.335 million tons. Considering imports, it is predicted that the total supply will reach 21.568 million tons and the total demand will reach 19.005 million tons. The oversupply of ethylene glycol is becoming more obvious, suppressing product prices. Nevertheless, new projects in the industry are still advancing in the future. The new devices are mainly multi-product co-production, and the ability of a single product to resist risks continues to weaken. Follow-up ethylene glycol enterprises will develop in the direction of integration, centralization and co-production.

 

P-xylene

 

In 2021, only two new paraxylene units are planned to be put into production. Among them, Zhejiang Petrochemical Co., Ltd. (hereinafter referred to as Zhejiang Petrochemical) has a production capacity of up to 5 million tons. The supporting facilities from refined oil products to downstream markets have been gradually improved, and the impact of paraxylene processing fees on the start of the industry has weakened. The operating rate of the para-xylene industry will remain high next year. With the increase in supply, competition among domestic and foreign companies in downstream purified terephthalic acid has intensified, and the paraxylene market is still facing many pressures.

 

Purified Terephthalic Acid

 

The market trend of purified terephthalic acid in 2021 may be difficult to get rid of the weak pattern. With the newly added 8.4 million tons of purified terephthalic acid production capacity this year, overcapacity has become an industry consensus. Although the downstream polyester has new capacity, the base is far less than the raw material purified terephthalic acid. At the same time, under the influence of the epidemic, terminal textile exports were hindered, and inventories in all links of the industrial chain maintained new highs. In addition, there are uncertainties in the crude oil market, and the fundamental game is still being seen. The current purified terephthalic acid industry has formed an oligopoly. After squeezing out high-cost devices, the possibility of a certain price alliance cannot be ruled out. In 2021, the purified terephthalic acid market may be in a period of low processing fees, and the price may be maintained at 3000-4500 CNY/ton.

 

Glacial acetic acid

 

The new capacity this year is only 100,000 tons expanded by Shaanxi Yanchang Petroleum (Group) Co., Ltd. (hereinafter referred to as Shaanxi Yanchang). However, there will be more new capacity in the future: Guangxi Huayi Energy Chemical Co., Ltd. 1.2 million tons project (500,000 tons planned to be put into operation by the end of the first quarter of 2021, 700,000 tons planned to be put into operation in the first half of 2022), Zhejiang Petrochemical 1 million tons, Inner Mongolia Ordos 600,000 tons project of City Xinnai Energy Chemical Co., Ltd., 1 million tons project of Inner Mongolia Zhuozheng Coal Chemical Co., Ltd., etc. In terms of demand, purified terephthalic acid has become the new main force, with acetate, diketene and chloroacetic acid all contributing part of the demand.

 

Acetate

 

In the case of overcapacity this year, the overall operating rate of ethyl acetate has remained at 45-55%. Affected by the epidemic, exports have been hit to a certain extent, and domestic terminal demand has gradually recovered. The overall supply increase will remain unchanged in the future. Exports and domestic demand affected by the epidemic have returned to normal levels.

Part of the storage device for sec-butyl acetate has been shut down for a long time. At present, only Hunan Zhongchuang Chemical Co., Ltd., Hunan Ruiyuan Petrochemical Co., Ltd., Shaanxi Yanchang, Jiangxi Jiujiang Qixin Chemical Co., Ltd. and Hebei Shijiazhuang Dingying Chemical Co., Ltd. 5 Companies maintain production. Because sec-butyl acetate is mainly used in oil-based paints, with the country's promotion of water-based paints, the application side of sec-butyl acetate has gradually shrunk, and companies have gradually returned from high profits to operation above the cost line, and operating pressure is greater.

The production capacity of acetic anhydride this year is 791,000 tons. Its process is divided into acetic acid cracking method and carbonyl synthesis method. Both processes have cost advantages and can continue to maintain profitability.

 

Pure benzene

 

This year, the overall supply of pure benzene in my country is relatively sufficient, and downstream supporting production capacity has been followed up to a certain extent, and the oversupply situation is not obvious. There are still many domestic expansion plans in 2021, and the total effective production capacity is expected to exceed 17.5 million tons. Affected by the epidemic, the relatively sluggish global supply flow will resume in 2021, and the arbitrage activity in Europe, America and Asia will increase, which may promote China's pure benzene import and export. It is expected that the balance between supply and demand of pure benzene in 2021 will fluctuate relative to this year, which is reflected in the strong supply and slow demand follow-up, but there will be no obvious surplus.

 

Toluene, xylene

 

In 2021, my country's theoretical production capacity of toluene and xylene will be further expanded with the construction of integrated refining and chemical projects, but most of the production capacity is only used as intermediate products of aromatics complex or refinery gasoline component products, and basically does not contribute to commodity volume. On the basis of increasing domestic supply pressure, it is difficult for toluene to grow in fine chemicals and oil blending. The supply rate of goods will further increase and the import volume is expected to decline. With regard to xylene, with the commissioning of new production capacity of paraxylene, domestic demand is expected to increase, and imports will continue to grow, but long-term losses will limit the operation of paraxylene companies, causing many variables in xylene supply and demand.

 

Styrene

 

With the successive commissioning of Zhejiang Petrochemical and Dalian Hengli, the domestic supply and demand structure of styrene has undergone significant changes and is directly reflected in price fluctuations. 2021 is still the year of styrene expansion, including the second phase of Zhejiang Petrochemical, the second phase of CNOOC and Shell Petrochemical Co., Ltd., Shandong Wanhua Chemical Group Co., Ltd. and many other large-scale plants will be put into operation. At that time, our country will be completely transformed into a country with an oversupply of styrene. In view of the relatively slow speed of downstream capacity expansion, the buyer's right to speak will be further enhanced, and the competition between enterprises and traders will further escalate.

 

Phenol

 

In 2021, the growth rate of my country's phenol production capacity will continue to increase, and the newly-built facilities of Zhejiang Petrochemical (Phase II) and Shandong Liaocheng Luxi Chemical Group Co., Ltd. will soon be put into operation. It is worth noting that most of the new projects are integrated projects, and the phenol industry chain extends towards the terminal and reflects the complementary advantages of the industry. The increasing self-sufficiency rate of domestic production is bound to exert certain pressure on imports. In view of the escalating competition between domestic enterprises and domestic and foreign sources, the buyer's dominant position has been further consolidated.

 

Acetone

 

In 2021, two domestic phenol ketone plants are planned to be put into operation, which will increase the domestic acetone self-sufficiency rate. Considering that in recent years, the newly installed phenol and ketone devices are basically used to improve the industrial chain and are matched with downstream devices, so the stability of the acetone market will be further enhanced.

 

Bisphenol A

 

In 2021, my country's bisphenol A production capacity will further expand. It is worth noting that most of the bisphenol A plants supporting downstream polycarbonate projects have been launched simultaneously, so the profitability and operating conditions of polycarbonate enterprises have a greater impact on bisphenol A. In the future, phenol-bisphenol A-polycarbonate is still the development trend of the industry chain. Although the domestic production capacity of bisphenol A continues to increase, due to technology and other reasons, some high-end products mainly rely on imports, so the import volume remains high.

 

Epoxy resin

 

This year there are few new epoxy resin projects in my country, with only 98,000 tons of newly added capacity, and the actual output is less than 20,000 tons. In 2021, domestic production capacity is expected to increase by 260,000 tons, which is a serious overcapacity.

 

Epichlorohydrin

 

This year, my country's epichlorohydrin production capacity has been greatly expanded, and the overall new production capacity is mainly glycerin, which has a certain impact on the market. In 2021, domestic production capacity is expected to increase by 345,000 tons. Due to the single consumption field of the domestic epichlorohydrin market, the downstream is mainly used for the production of epoxy resin. It is expected that the apparent consumption of epichlorohydrin will reach 804,000 tons in 2021, and the industry will continue to experience overcapacity.